Amaya Inc.’s former chief executive officer put forward a $3.5-billion takeover proposal for the online gambling company, backed by four overseas investment firms.
The $24-per-share offer led by David Baazov – a premium of 30.9 per cent to Amaya’s closing price – comes more than nine months after he first announced his intention to take the company private. But the former executive’s legal troubles stand as a potential obstacle to completing the deal.
Unlike Mr. Baazov’s approach earlier in the year, this one is financed. The proposed acquisition of Amaya is backed by $3.65-billion in financing from four separate funds: Head and Shoulders Global Investment Fund SPC of Hong Kong, Goldenway Capital SPC of Hong Kong, Ferdyne Advisory Inc. of the British Virgin Islands and Dubai-based KBC Aldini Capital Ltd.
Mr. Baazov already owns 17.2 per cent of Amaya (once all options are exercised). But the former executive faces criminal charges of illegal insider trading laid earlier this year by Quebec’s securities watchdog, the Autorité des marchés financiers (AMF). He has pleaded not guilty, and he resigned the last of his positions with the company in August, four months after he took a paid leave to fight the AMF charges.
While the stock increased 14.4 per cent Monday, it closed more than $3 below the offer price, suggesting some skepticism over whether the deal will go through.
“If your [former] CEO and your owner is being charged [with insider trading], and ultimately convicted, that’s a problem,” Alan Sarhan, partner with Bretton Woods Law Canada, said in an interview. “Even if this is taken private, there are still standards that have to be adhered to.”
In a conference call with analysts on Monday, Rafi Ashkenazi, Amaya’s chief executive officer, said the company intends to promptly respond to the offer.
Separately, in regulatory filings on Monday, Amaya disclosed that it is reviewing whether the company or any of its subsidiaries may have made “improper payments” to foreign government officials.
The payments may have been made though Amaya’s now-defunct lottery services business, a discontinued gaming terminals refurbishment business, or through external consultants, according to the filing. Amaya has made the Royal Canadian Mounted Police, the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) aware of its findings.
Mr. Sarhan said that the language of “improper payments” is typically used by companies to describe payments that are either so-called “facilitating payments” or bribes. Facilitating payments occur when a company pays an official to accelerate something that it is entitled to already.
Communicating with the DOJ and SEC early in the process opens up the possibility of Amaya settling early on deferred prosecution, Mr. Sarhan said. The fact the business has been wound down is irrelevant and does not absolve Amaya of responsibility, he said.
Amaya said the possibility of improper payments came to light during its own internal investigation stemming from the AMF’s insider-trading investigation.
Mr. Sarhan said that regulators will likely consider the improper payments issue in any takeover scenarios. “This just adds to their woes.”
A spokesperson with Amaya said the company had no additional comment beyond what was disclosed in the regulatory filing.
“Mr. Baazov is aware of the [improper payments] language and it doesn’t impact his offer,” a spokesperson for David Baazov said.
Shareholders were beginning to wonder if a deal would ever materialize for Montreal-based Amaya, especially after talks with potential suitor William Hill PLC were abruptly called off last month and the company said its board had concluded that remaining as an independent, publicly traded corporation was the best strategy for shareholders.Report Typo/Error
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